2nd Jul 2015 11:20
LONDON (Alliance News) - Berenberg upgrades its price target on Topps Tiles PLC to 175 pence from 170p, saying that the bathroom and kitchen tile maker's third-quarter results announced on Wednesday were markedly above the consensus forecast.
Topps Tiles posted a 5.9% rise in like-for-like revenue in the 13 weeks to June 27, beating the 3% consensus estimate and also higher than the 5.3% growth it reported for the first half of the year.
"With the Topps Tiles business highly operationally geared, we believe [earnings before interest and tax] margin development could accelerate at a faster pace than currently anticipated," Berenberg says.
The broker increases its earnings per share estimates for 2015, 2016 and 2017 by 3%.
"Topps remains one of our preferred UK mid-cap stocks and despite the shares rising almost 40% since initiation we see further potential in the medium term," Berenberg says.
"We believe the current stock price implies that margins will improve to 12.5%. In our view, this is too conservative and we remain convinced that our long-run margin assumption of 15% is possible
in the medium term - implying our current price target of GBP1.75," the broker adds.
Berenberg retains its Buy rating on the stock.
Shares in Topps Tiles are trading down 1.4% at 142.93 pence midday Thursday.
By Karolina Kaminska; [email protected] @KarolinaAllNews
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